Leases and underleases - Repair obligations

Learning Outcomes

This article explores the key principles governing repair obligations in leases and underleases. For the SQE1 assessments, you will need to understand the difference between landlord and tenant responsibilities for repairs, how these are defined by statute (particularly the Landlord and Tenant Act 1985) and common law, and the implications of express covenants within lease agreements. Your understanding of these areas will enable you to identify the correct legal position and advise clients effectively in SQE1-style single best answer questions.

SQE1 Syllabus

For SQE1, you are required to understand the practical application of repair obligations in both residential and commercial leases. This includes advising on liability for specific types of disrepair and the remedies available for breaches of repairing covenants.

As you work through this article, remember to pay particular attention in your revision to:

• Landlord's statutory repairing obligations under s.11 Landlord and Tenant Act 1985.
• Tenant's implied and express repairing covenants, including the standard of repair.
• Common types of repair covenants (absolute, qualified, fully qualified).
• The structure and implications of Full Repairing and Insuring (FRI) leases.
• Remedies available for breach of repairing covenants, including damages, specific performance, forfeiture, and self-help (Jervis v Harris clauses).
• Statutory limitations on damages for disrepair (s.18 Landlord and Tenant Act 1927).

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Under which section of the Landlord and Tenant Act 1985 are repairing obligations implied into short residential leases?
   1. Section 8
   2. Section 11
   3. Section 18
   4. Section 25
2. Which common law case established the principle that a tenant must use premises in a 'tenant-like manner'?
   1. Proudfoot v Hart
   2. Street v Mountford
   3. Warren v Keen
   4. Jervis v Harris
3. A tenant has a covenant 'to keep the premises in good repair'. The premises were in poor condition at the start of the lease. What is the tenant's obligation?
   1. To return the premises in the same condition as at the start.
   2. To carry out only minor maintenance tasks.
   3. To put the premises into good repair, even if that improves them.
   4. To repair only damage caused by the tenant.

Introduction

Repair obligations are a frequent source of disputes between landlords and tenants. Understanding who is responsible for repairs is important in property practice. These obligations derive from a combination of express terms within the lease agreement, implied terms at common law, and statutory duties imposed by Parliament. For SQE1, you must be able to identify the source and extent of repairing obligations in various scenarios, particularly concerning both residential and commercial leases, and understand the consequences of breaching these obligations. This article outlines the key legal principles and common lease provisions governing repairs.

Sources of Repair Obligations

The responsibility for repairs in a leasehold property can arise from several sources. It is essential to determine which party bears the responsibility for specific types of repair based on the lease agreement and applicable law.

Express Covenants

Most modern leases contain express covenants detailing the repairing obligations of both the landlord and the tenant. These clauses explicitly state which party is responsible for maintaining different parts of the property (e.g., structure, exterior, interior, common parts).

Key Term: Repair Covenant
An express clause within a lease agreement that sets out the specific obligations of the landlord and/or tenant regarding the repair and maintenance of the leased property.

The exact wording of the express covenant is critical. A covenant 'to repair' generally means keeping the premises in the condition they would be kept in by a reasonably minded owner, considering the property's age, character, and location (Proudfoot v Hart (1890)). A covenant 'to keep in repair' imposes an obligation not only to maintain the current condition but also to put the property into repair if it is currently in disrepair, even if this requires improvement (Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980]).

Implied Obligations

Where a lease is silent on repair obligations, certain duties may be implied by common law or statute.

Landlord's Implied Obligations

At common law, landlords generally have limited implied repair obligations, typically restricted to maintaining common parts under their control in multi-occupied buildings and ensuring the property is fit for human habitation at the start of the letting (mainly relevant to furnished residential lettings).

The most significant implied obligations arise under statute, primarily the Landlord and Tenant Act 1985 (LTA 1985).

Key Term: Implied Covenant
A term deemed to be part of a lease agreement by law (either common law or statute), even if not expressly written into the document.

Section 11 LTA 1985: This section implies a covenant by the landlord into leases of dwelling houses granted for a term of less than seven years. The landlord must:

• keep in repair the structure and exterior of the dwelling-house (including drains, gutters and external pipes).
• keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity).
• keep in repair and proper working order the installations in the dwelling-house for space heating and heating water.

These obligations cannot be excluded by the lease terms. The landlord's liability generally only arises once they have notice of the defect.

Tenant's Implied Obligations

At common law, tenants have an implied duty to use the property in a 'tenant-like manner' (Warren v Keen [1953]). This involves carrying out minor day-to-day maintenance (e.g., changing fuses, unblocking sinks) and not causing damage (committing waste). Tenants are generally not impliedly responsible for major structural repairs or for remedying fair wear and tear unless the lease explicitly requires it.

Full Repairing and Insuring (FRI) Leases

In commercial property, particularly leases of whole buildings, it is common to encounter Full Repairing and Insuring (FRI) leases.

Key Term: FRI Lease
A lease, typically commercial, where the tenant takes responsibility for all repairs (both internal and external/structural) and for insuring the property, or reimbursing the landlord's insurance costs.

FRI leases aim to provide the landlord with a 'clear rent', meaning the rental income is received without deductions for property outgoings like repairs or insurance. The tenant effectively bears the full cost of maintaining the property throughout the term. Even in leases of part, tenants often bear a proportionate cost of repairing the structure and common parts via a service charge, making the effect similar to an FRI obligation.

Worked Example 1.1

A tenant occupies a shop under a 5-year commercial lease granted in 2022. The lease contains a tenant covenant 'to keep the premises in good repair' but is silent on structural repairs. A major crack appears in an external wall due to subsidence. Who is responsible for the repair?

Answer: The tenant is likely responsible. The covenant 'to keep in repair' includes putting into repair. While generally interpreted in light of the property's condition at commencement, significant disrepair may still fall under this obligation. As it's a commercial lease, s.11 LTA 1985 does not apply. The tenant should check if subsidence is an insured risk excluded from their liability under the insurance clauses. If not, the tenant is likely liable for the structural repair under this express covenant.

Standard of Repair

The required standard of repair is often a point of contention. The leading case, Proudfoot v Hart (1890), established that the standard depends on the "age, character, and locality" of the property. It does not require the tenant to provide the landlord with a fundamentally different property from the one demised.

This means:

• An old property does not need to be modernised.
• Repairs should be appropriate for the property's character (e.g., using suitable materials).
• The standard required is that which would make the property reasonably fit for occupation by a reasonably-minded tenant of the class likely to take it.

A covenant 'to keep in good condition' may impose a higher standard than simply 'to repair', potentially requiring work even without disrepair if the condition is poor.

Remedies for Breach of Repair Covenant

If a party fails to comply with their repairing obligations, the other party has several potential remedies.

Landlord's Remedies for Tenant's Breach

1. Damages: The landlord can sue the tenant for damages for breach of covenant. However, s.18(1) LTA 1927 imposes significant limitations:

   • Damages are capped at the diminution (reduction) in the value of the landlord's reversion caused by the breach. This may be less than the cost of the repairs.
   • No damages are recoverable if the premises are to be demolished or structurally altered at the end of the term in a way that renders the repairs valueless. The Leasehold Property (Repairs) Act 1938 may also apply (for leases granted for 7+ years with 3+ years remaining), requiring the landlord to serve a notice (a s.146 notice, see below under Forfeiture) and potentially seek leave from the court before claiming damages if the tenant serves a counter-notice.

2. Specific Performance: An order compelling the tenant to carry out the repairs. This is an equitable remedy granted at the court's discretion and is rare, particularly as it requires ongoing supervision. It is more likely if damages are inadequate and forfeiture is inappropriate.

3. Forfeiture: The landlord may seek to terminate the lease prematurely. This requires an express forfeiture clause in the lease. For breach of a repair covenant, the landlord must first serve a notice under s.146 LPA 1925, specifying the breach, requiring remedy (if possible) within a reasonable time, and claiming compensation if desired. If the Leasehold Property (Repairs) Act 1938 applies, the s.146 notice must inform the tenant of their right to serve a counter-notice; if served, the landlord needs court leave to proceed. The tenant can apply for relief from forfeiture.

4. Self-Help (Jervis v Harris Clause): Many modern leases include a clause allowing the landlord to enter, carry out repairs if the tenant defaults after notice, and recover the cost from the tenant as a debt.

Key Term: Jervis v Harris Clause
A lease clause allowing the landlord to enter the premises to carry out repairs that are the tenant's responsibility (usually after giving the tenant notice and a chance to remedy) and then recover the costs from the tenant as a debt, avoiding the limitations on damages under s.18 LTA 1927.

This is often the most effective remedy for landlords, bypassing the statutory limitations on damages claims.

Tenant's Remedies for Landlord's Breach

1. Damages: The tenant can sue the landlord for damages for losses resulting from the disrepair (e.g., damage to belongings, inconvenience, personal injury).
2. Specific Performance: The court may order the landlord to perform their repair obligations, especially where damages are inadequate (e.g., persistent failure affecting habitability). This is more common against landlords than tenants.
3. Self-Help (Set-off): A tenant may, in certain circumstances, carry out the repairs themselves and deduct the reasonable cost from future rent payments. This right exists at common law but requires the tenant to follow a strict procedure: notify the landlord of the disrepair, give the landlord a reasonable time to act, warn the landlord of the intention to do the work and deduct the cost, obtain estimates, carry out the work, and provide receipts to the landlord. This carries risks if the procedure is not followed correctly or if the cost is deemed unreasonable.

Worked Example 1.2

A commercial lease granted for 10 years in 2018 contains a tenant covenant to repair the interior and a landlord covenant to repair the structure. The roof (part of the structure) is leaking, causing damage to the tenant's stock. The tenant has notified the landlord, who has failed to act. What remedy should the tenant pursue?

Answer: The tenant should consider suing the landlord for damages to recover the cost of the damaged stock and potentially losses from business interruption. The tenant could also seek an order for specific performance to compel the landlord to repair the roof, as this is a structural issue falling under the landlord's covenant. Using self-help (set-off) is risky in commercial leases unless expressly permitted and the procedure is complex.

Revision Tip

Always check the date the lease was granted and its term. Statutory obligations (like s.11 LTA 1985) and restrictions on remedies (like the Leasehold Property (Repairs) Act 1938) often depend on these factors.

Key Point Checklist

This article has covered the following key knowledge points:

• Repair obligations arise from express lease covenants, implied common law duties, and statutory provisions (notably s.11 LTA 1985 for short residential leases).
• The standard of repair depends on the property's age, character, and location (Proudfoot v Hart).
• A covenant 'to keep in repair' includes an obligation to put into repair if necessary.
• Full Repairing and Insuring (FRI) leases place the primary burden of repairs and insurance on the commercial tenant.
• Remedies for tenant's breach include damages (limited by s.18 LTA 1927), specific performance (rare), forfeiture (requires s.146 notice), and self-help via a Jervis v Harris clause (recovering costs as debt).
• Remedies for landlord's breach include damages, specific performance, and potentially self-help/set-off against rent (requires strict procedure).
• Statutory protections (e.g., Leasehold Property (Repairs) Act 1938) may apply, restricting the landlord's ability to enforce repair claims.

Key Terms and Concepts

• Repair Covenant
• Implied Covenant
• FRI Lease
• Jervis v Harris Clause